Financial Reporting Quality: Aggregate Accruals
Earnings can be decomposed into cash and accrual components. The accrual component (aggregate accruals) has been found to have less persistence than the cash component, and therefore (1) earnings with higher accrual component are less persistent than earnings with smaller accrual component, all else equal; and (2) the cash component of earnings should receive a higher weighting evaluating company performance.
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Palantir Technologies Inc. pages available for free this week:
- Cash Flow Statement
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Short-term (Operating) Activity Ratios
- Dividend Discount Model (DDM)
- Present Value of Free Cash Flow to Equity (FCFE)
- Selected Financial Data since 2020
- Debt to Equity since 2020
- Total Asset Turnover since 2020
- Price to Operating Profit (P/OP) since 2020
- Analysis of Revenues
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Balance-Sheet-Based Accruals Ratio
Palantir Technologies Inc., balance sheet computation of aggregate accruals
US$ in thousands
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Operating Assets | ||||||
| Total assets | ||||||
| Less: Cash and cash equivalents | ||||||
| Less: Marketable securities | ||||||
| Operating assets | ||||||
| Operating Liabilities | ||||||
| Total liabilities | ||||||
| Operating liabilities | ||||||
| Net operating assets1 | ||||||
| Balance-sheet-based aggregate accruals2 | ||||||
| Financial Ratio | ||||||
| Balance-sheet-based accruals ratio3 | ||||||
| Benchmarks | ||||||
| Balance-Sheet-Based Accruals Ratio, Competitors4 | ||||||
| Accenture PLC | ||||||
| Adobe Inc. | ||||||
| AppLovin Corp. | ||||||
| Cadence Design Systems Inc. | ||||||
| CrowdStrike Holdings Inc. | ||||||
| Datadog Inc. | ||||||
| International Business Machines Corp. | ||||||
| Intuit Inc. | ||||||
| Microsoft Corp. | ||||||
| Oracle Corp. | ||||||
| Palo Alto Networks Inc. | ||||||
| Salesforce Inc. | ||||||
| ServiceNow Inc. | ||||||
| Synopsys Inc. | ||||||
| Workday Inc. | ||||||
| Balance-Sheet-Based Accruals Ratio, Sector | ||||||
| Software & Services | ||||||
| Balance-Sheet-Based Accruals Ratio, Industry | ||||||
| Information Technology | ||||||
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 2025 Calculation
Net operating assets = Operating assets – Operating liabilities
= – =
2 2025 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2025 – Net operating assets2024
= – =
3 2025 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × ÷ [( + ) ÷ 2] =
4 Click competitor name to see calculations.
The information presents trends in net operating assets, aggregate accruals, and a balance-sheet-based accruals ratio over a four-year period. Significant fluctuations are observed in both net operating assets and aggregate accruals, with a notable accruals ratio reported for the final year.
- Net Operating Assets
- Net operating assets demonstrate substantial volatility. A positive value of US$8,762 thousand is recorded for December 31, 2022, followed by significant negative values of US$-113,214 thousand and US$-135,580 thousand for December 31, 2023 and December 31, 2024, respectively. A substantial positive shift occurs in the final period, with net operating assets reaching US$310,968 thousand on December 31, 2025.
- Aggregate Accruals
- Aggregate accruals mirror the volatility observed in net operating assets. The value for December 31, 2022 is US$242,559 thousand. This is followed by negative accruals of US$-121,976 thousand and US$-22,366 thousand for December 31, 2023 and December 31, 2024, respectively. A substantial increase is then observed, with aggregate accruals reaching US$446,548 thousand on December 31, 2025.
- Balance-Sheet-Based Accruals Ratio
- A balance-sheet-based accruals ratio is reported only for December 31, 2025, at 509.21%. This exceptionally high ratio suggests a significant proportion of reported earnings are attributable to accruals rather than cash flows during that period. The absence of this ratio for prior years limits comparative analysis, but the reported value warrants further investigation into the underlying components of accruals and their potential impact on earnings quality.
The large swings in both net operating assets and aggregate accruals, culminating in a very high accruals ratio in the final year, suggest potential areas for further scrutiny. The substantial increase in accruals relative to net operating assets in 2025 could indicate aggressive accounting practices or a significant change in the company’s operational cycle. A detailed examination of the specific accrual components is recommended to assess the sustainability of reported earnings and the overall quality of financial reporting.
Cash-Flow-Statement-Based Accruals Ratio
Palantir Technologies Inc., cash flow statement computation of aggregate accruals
US$ in thousands
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Net income (loss) attributable to common stockholders | ||||||
| Less: Net cash provided by operating activities | ||||||
| Less: Net cash used in investing activities | ||||||
| Cash-flow-statement-based aggregate accruals | ||||||
| Financial Ratio | ||||||
| Cash-flow-statement-based accruals ratio1 | ||||||
| Benchmarks | ||||||
| Cash-Flow-Statement-Based Accruals Ratio, Competitors2 | ||||||
| Accenture PLC | ||||||
| Adobe Inc. | ||||||
| AppLovin Corp. | ||||||
| Cadence Design Systems Inc. | ||||||
| CrowdStrike Holdings Inc. | ||||||
| Datadog Inc. | ||||||
| International Business Machines Corp. | ||||||
| Intuit Inc. | ||||||
| Microsoft Corp. | ||||||
| Oracle Corp. | ||||||
| Palo Alto Networks Inc. | ||||||
| Salesforce Inc. | ||||||
| ServiceNow Inc. | ||||||
| Synopsys Inc. | ||||||
| Workday Inc. | ||||||
| Cash-Flow-Statement-Based Accruals Ratio, Sector | ||||||
| Software & Services | ||||||
| Cash-Flow-Statement-Based Accruals Ratio, Industry | ||||||
| Information Technology | ||||||
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 2025 Calculation
Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × ÷ [( + ) ÷ 2] =
2 Click competitor name to see calculations.
The information presents trends in net operating assets and cash-flow-statement-based accruals, culminating in a calculated accruals ratio for the final period. Significant fluctuations are observed in both net operating assets and aggregate accruals over the examined timeframe.
- Net Operating Assets
- Net operating assets demonstrate substantial volatility. A positive value of 8,762 thousand dollars is recorded for December 31, 2022. This is followed by significant negative values of -113,214 thousand dollars and -135,580 thousand dollars for December 31, 2023 and December 31, 2024, respectively. A substantial reversal occurs by December 31, 2025, with net operating assets reaching 310,968 thousand dollars.
- Cash-Flow-Statement-Based Aggregate Accruals
- Aggregate accruals exhibit even more pronounced fluctuations. A negative value of -552,015 thousand dollars is reported for December 31, 2022. This shifts dramatically to a positive 2,208,822 thousand dollars for December 31, 2023. A subsequent decrease is seen with -351,020 thousand dollars on December 31, 2024, followed by a large positive value of 2,274,111 thousand dollars on December 31, 2025.
- Cash-Flow-Statement-Based Accruals Ratio
- The accruals ratio is only available for December 31, 2025, registering at 2,593.23 percent. This exceptionally high value suggests a considerable proportion of reported earnings are derived from accruals rather than actual cash flow during that period. The absence of this ratio for prior years limits comparative analysis, but the magnitude of the 2025 value warrants further investigation into the underlying components of accruals and their potential impact on earnings quality.
The large swings in both aggregate accruals and net operating assets, coupled with the high accruals ratio in the final year, suggest potential areas for deeper scrutiny regarding the company’s earnings management practices and the sustainability of reported earnings.